Myths and Realities of Long-run Development: A Look at Deeper Determinants

Abstract

It has long been realised that factor accumulation and technological
development are only proximate causes of economic development, and focus
has now shifted to investigating the ‘deeper determinants’ of economic growth.
Two such forces are highlighted in literature: institutions and geography.
However, it remains controversial as to which of these two is the more
important. The “Institutions school” assigns primal importance to institutions,
whereas the “Geography school” considers geographical factors as the primary
determinant of economic performance of countries. This paper reviews the
debate surrounding these “deeper determinants” of economic performance. It
reviews the work of these two schools of thought and their interpretation of the
long-run development. The paper then examines the evidence provided by the
respective schools in favour of their hypotheses. It concludes in favour of the
Institutions hypothesis as the Geography school does not provide a consistent
story of long-run development.

Item Type:

MPRA Paper

Original Title:

Myths and Realities of Long-run Development: A Look at Deeper Determinants